Your Important Papers: What, Why, and How Long to Keep – 9.165

Quick Facts…

A systematic plan for keeping track of important documents can save you hours of anxious searching for misplaced items.

It is important to carefully store valuable papers which would be difficult or timeconsuming to replace. These hard-to-replace documents are ideally kept in a safe deposit box or a fire-proof, water-proof, burglar-proof home safe or lock box.

Electronically stored records must be legible, readable, and accessible for the period of limitations required. It is important to back up electronic files in case of a computer malfunction.

Wherever you live there is always the risk of fires, floods, and other disasters, and your home and important documents could be totally destroyed. Assemble a ‘Grab-n-Go’ emergency bucket, box, tote, backpack, or electronic storage device (USB ‘jump’ drive) to have available on short notice.

Important papers prove certain events occurred and they are used to document financial transactions. They may be needed at various times during one’s life. For example, a birth certificate is used to prove age when starting school, to obtain a driver’s license, or to apply for Social Security benefits. It is also needed by relatives to obtain a death certificate. Financial records are the key to your credit standing, essential to helping save money on income taxes owed, and provide an indication of your financial progress through life.

A systematic plan for keeping track of important documents can save you hours of anxious searching for misplaced items. It can also help you reduce the amount of nonimportant papers cluttering your home.

Valuable papers can be sorted into two types: those needed for day-to-day use and those needed occasionally. Examples of valuable papers used frequently include a driver’s license, credit cards, health insurance card, bank account records, identification card, and special health documentation such as for allergies, disabling conditions, and blood type. Examples of valuable papers used occasionally include birth, marriage, and death certificates; deeds; leases; contracts; insurance policies; military papers; divorce decrees; Social Security records; and wills.

It is important to carefully store valuable papers which would be difficult or timeconsuming to replace. These include items like original birth and marriage certificates and property titles. These hard-to-replace documents are ideally kept in a safe deposit box or a fire-proof, water-proof, burglarproof home safe or lock box. Other important records may be filed at home or carried in a wallet or purse. These records and papers are those needed for identification purposes or for emergency medical treatment.

People often keep a combination of paper and digital records. Digital records are kept by storing electronic images on an electronic storage system like a computer hard drive or portable drive. According to the IRS (See IRS Publication #552, ‘Record-keeping for Individuals’) all requirements applying to hard copy records also apply to electronic storage systems which maintain tax books and records. Electronically stored records must be legible, readable, and accessible for the period of limitations required (see Chart 1). It is important to back up electronic files in case of a computer malfunction.

Regardless of how records are stored, regular filing and review of documents is important. Making the decision on when to discard old files is often difficult. Chart 1 lists records and important papers typically needed and why they are important. The chart also provides guidelines on how long records should be kept.

Because every household may have unique situations, there is space for additional records at the end. Due to the danger of identity theft consider destroying any documents you decide are outdated. It is important to shred or safely burn documents which contain your name, address, Social Security number, debit/credit card numbers, or other sensitive financial information.

Having your important papers organized and accessible can help you in many ways. If you are meeting with an attorney or financial adviser, you can prepare for the discussion and perhaps reduce the total cost of the consultation. If something should happen to you, it allows a loved one or trusted designee to readily locate durable and health-care powers of attorney, insurance policies, medical records, estate plans, and outstanding bills. See the eXtension web page ‘Organize Your Important Household Papers’ for more information.

Wherever you live there is always the risk of fires, floods, and other disasters, and your home and important documents could be totally destroyed. Prepare yourself so you can minimize the impact. Assemble a ‘Grab-n-Go’ emergency bucket, box, tote, backpack, or electronic storage device (USB ‘jump’ drive) to have available on short notice. This emergency pack should contain hard copies or electronic images of important papers to quickly take when evacuating: credit and banking information; driver’s licenses; birth certificates; insurance information including auto, health, medical, and home; important medical information such as medication and immunization records; personal property inventory with photos or videos; list of usernames and passwords for accounts accessed on the Web. See fact sheet 9.156, Financial Emergency Preparedness for a form to complete with this important information. It is recommended that you also have an extra set of keys for your autos, home, safety deposit box or safe; and enough cash to purchase fuel for auto, food, toiletries, and lodging for several days.

Reference and information, proof of employer-employee contributions, payments and benefits received or payable

While in force or fund is exhausted

Safe Deposit Box

List of contents in home file

Reference and information for family members, documentation for insurance settlement in case of loss (fire or theft)***

Update as needed

Subscriptions/Memberships

Titles, renewal dates
Membership details, renewal dates

Reference
Determine renewal dates

Update as needed

Warranties and Guarantees

Owner manuals

Reference and information, service, adjustments of defects of equipment or parts

During ownership

Wills

Copy of will
Trust documents
Letter of last instructions
Durable Power of Attorney
Durable Power of Attorney for Health Care
Medical Directives (living will)
List of locations of important documents, names, contact information of personal & legal advisers
Burial lot deeds

Reference, essential for settlement of estate
Instructions for family members
Gives others power to make financial decisions
Gives others power to make medical decisions when you are unable to make decisions
Reference specifying end-of-life care, instructions to doctors, hospital, nursing facility, hospice, home health agency, and family members
Proof of ownership

Permanently, update as needed

Other (list)

Other (list)

Other (list)

*Note: The Internal Revenue Service has three (3) years to audit Federal income tax returns (or two years from the date the tax was paid, whichever is later). However, this limit does not apply in ‘unusual’ cases. If an amount of income which should have been reported was not, and it is more than 25 percent of the income shown on the return, the period of limitation does not expire until six (6) years after the return was filed. There is no time limitation when a return is false or fraudulent, or when no return is filed. (See IRS Publication #552, ‘Record-keeping for Individuals’).

While you do not have to keep all possible financial records for tax purposes, if audited you will want to have cancelled checks or other verification of payment relating directly to entries on your tax return. In some cases, it is advantageous to keep records longer than the recommended period. For example, when selling your principal residence and claiming the capital gains exclusion allowed by the IRS, documentation of original purchase price and capital improvements may be required.

**Check with your insurance agent /broker for company requirements of proof of purchase and/or ownership of real and personal property in the event an insurance claim is filed. (In some cases, payment receipts are required; in other cases a written inventory and/or photographs is adequate documentation.)

***Contents of a safe deposit box usually are not covered by Federal Deposit Insurance Corporation (FDIC) insurance. Check with your insurance agent/broker regarding coverage under your homeowner’s insurance policy or to determine if other coverage provisions are available.